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It’s not a hobby is more than a tagline- it encapsulates the whole philosophy behind my work as a business mentor as I work with people move from surviving to thriving in business. You see, business is not a hobby - and it’s a hobby mindset that gets in the way of people running successful, profitable and sustainable businesses. Let me explain.
OK, before we get into the nuts and bolts of my ethos of ‘it’s not a hobby,’ the ATO has clear guidelines around the legal descriptions of what constitutes a hobby vs a business, namely around assessable income. Generally speaking, the transition of hobby to business comes when someone moves from selling $8-10k per year to selling in excess of $10-50k in a year.
Please speak to your accountant about your individual circumstances!
Disclaimer complete, broadly speaking, in the vernacular, a hobby is basically a leisure-based pastime. You do it for fun, in your spare time and it’s something that brings you a lot of joy or a lot of satisfaction. Think sewing quilts or clothes, making candles or soap or nurturing plants aka the opposite of what I do to them. If someone likes the look of what you’re creating, you either gift it to them or you charge the cost of materials.
After a while, more and more people tell you that you’re on a bit of a winner here, so you might book a market stall at your local, or sell online via Marketplace. Word gets out about your beautiful, must-have thing-a-ma-jigs and momentum grows. This is traction, and it means you’re busier and busier as orders rise. So too your stress levels as you don’t want to fail in terms of deliverables. Now, instead of making something around your lifestyle, the making something is your lifestyle, much to the chagrin of your family who only see the grumpy you, and your friends who don’t see you at all. As for your tax, financial, insurance and legal obligations? Sorry what?
That entire paragraph above is the classic example of a hobby that’s become an accidental business. Of course, there are people who find a hobby or a pastime they absolutely love and want to do it every day as a business and they want to do it well.
People often join my programs or reach out for services knowing they’re not running their business as effectively and efficiently as they could and should be. Some are in that ‘accidental business’ category above and need support transitioning to a small business model, even in their mindset, let alone systems and processes.
Creating a comprehensive, cohesive business plan of course is one way of clarifying the strength and potential (or otherwise) of a business concept. You’ll also determine through the act of planning whether or not you’re actually breaking even financially, let alone making money. An essential element of any Julie Doyle business plan is a SWOT analysis against a number of elements such as products or services, processes, marketing and admin. For many of my clients navigating the space between hobby and business, the SWOT is where the rubber hits the road. It’s here that they see in no uncertain terms that this entity they’ve created has the potential to be a sustainable, lucrative business. This is transformative. It’s exhilarating to consider the strengths and opportunities, yet can also be terrifying when the scale of the threats becomes clear. Imagine you hear from a customer that a child has a needlestick injury from a pin you accidentally left in the seam of one of your handcrafted quilts. You’ll see the ramifications that can arise from using your personal bank account for your business, which effectively is using your business finances like a piggy bank. The SWOT in particular and business planning in general is a clear, unambiguous way to evaluate an offering.
When people make the switch from hobby mindset to business, the first thing they put into place is boundaries. Sometimes, by the time they reach this stage they are in the early stages of burnout. They respond to clients day and night and work weekends and around the clock. Their business runs them. A business mindset flips this around.
A business approach also unveils a world of obligations, some of which can feel overwhelming. The documentation required by the ATO and other governing bodies alone can be daunting. There’s a lot of admin associated with running a small business- from bookkeeping, systems and processes to track and manage output, even implementing and working towards Terms and Conditions adds a level of complexity.
That all sounds quite negative, really, doesn’t it? True, by definition a hobby is something that drives happiness, joy and fulfilment, but guess what? So does a business, particularly one that is designed around your life, that has a cashflow that’s healthy to the point of you happy dancing (no shame, we all do it!) and offers benefits like claiming tax deductions of your business expenses against your income - again, this is a conversation for your accountant.
Bottom line - when you’re in business, when you’re armed with an ABN, let’s go all in and ensure your business is as successful and profitable AND enjoyable to you as it possibly can be. Let’s tick all those boxes. For more information about how I can be of support, please reach out and we’ll have a chat.